Enriques Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During February, the company budgeted for 5,000 units, but its actual level of activity was 4,990 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for February:
-The activity variance for direct labor in February would be closest to:
A) $61 U
B) $1,081 U
C) $61 F
D) $1,081 F

Question

Enriques Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During February, the company budgeted for 5,000 units, but its actual level of activity was 4,990 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for February: 
-The activity variance for direct labor in February would be closest to:
A) $61 U 
B) $1,081 U 
C) $61 F 
D) $1,081 F

Quizplus · Accepted Answer

Activity variance for direct labor = (Actual hours worked - Budgeted hours worked) × Standard labor rate per hour
= (4,970 - 5,000) × $12
= -$360

Since the activity was less than budgeted, the variance is unfavorable, or "Favorable" for $360.
However, since the question asks for the activity variance, the answer will be the absolute value of $360. 
Therefore, the closest answer is C) $61 F, since $360 is closer to $0 than $1,081.

Enriques Corporation Manufactures and Sells a Single Product